tv Squawk Box CNBC April 26, 2013 6:00am-9:00am EDT
good morning. joe talking about it, first quarter gdp, the government data set to be released at 8:30 eastern time. forecasters say the economy likely grew at an annual rate of 3.2%. the catalyst, an improvement in housing, steady consumer spending and most importantly, a big increase in stockpiling by businesses. are you okay there? >> squeaking a little. it's my back. it's weird. >> it happens when you hit 30. is it about to rain, joe? is that what's happening? >> let me check my lumbego. i don't know. and i can tell you, andrew and becky, there is nothing going on there. they are definitely -- >> because they're both off on the same day. >> yeah.
>> you know people talk when people do that. >> in this case, i don't think people are talking. >> they might think it's -- >> you never know. >> we should start that rumor. >> yeah. >> having you two, you know, it's babe-alicious on the set today. it really is. and i'm going to -- she introduced you because i'm not saying your last name. >> why not? >> because you're kayla. >> just kayla. >> exactly. >> why not start that and i'll get credit for it years down the road when you're known as kayla. >> when i'm a singer song writer? >> no. i think a business person known as kayla. >> and eventually formerly known as kayla probably. was one of heff's girls on that show -- the name of the character is actually from "days of our life."
don't let a woman who is nine months pregnant choose a name for your child. >> we love your name. >> thank you. >> you've been on when i haven't been here, right? >> yes. and that was measurable. >> this will be even better. >> you can attest to that? okay. because andrew does not. and if they're not funny, you just pretend it's a commercial break. >> noted. >> someone probably gets that. you might not get them all. how old are you? >> here is a step i always make. old enough to run for the house but not the senate. >> that's good. >> i don't know what that means. >> it's true, though. because the geezers in the senate that don't do anything -- >> the guys in the senate are rich, i always knew that. >> they're gray haired and pampas. >> that's the whole congress. >> yeah. but in the house, you have these guys who have been there for two years, then they're gone. they're 28 years old and they leave. >> they've just seen their first
r-rated movie, they make their way into the house and the rest is history. >> in global economic news, did bank of japan says it expects inflation rise to around 2% due to its massive stim use husband plan. the comments come as a separate report today shows prices there have now declined for five consecutive months. the boj is working to reverse 15 years of deflation with a massive program. u.s. equity futures at this hour are suggesting a slightly weaker open. not by much, though. they've reversed in the last ten minutes. the dow jones industrial average would opener higher by nearly 5 points. and the nasdaq would open higher by a little more than nine. the major averages are up modestly so far this week having alternated between gains and losses now for seven weeks in a row. the nasdaq is on pace for its third best weekly gain in a year. major markets in europe, let's
show you what's going on there are lower across the board by a decline of roughly 0.5% except for the cac 40 and powers which is lower by 1%. asian markets, the hang seng was higher by 146 points, a gain of 0.6%. the shanghai composite lower by 1% and the nikkei was lower by 0. %. we'll have more from our colleagues overseas in just a few minutes. what are you doing here? >> commodities. are rebound this week, oil coming off its best two-day winning streak since august. taking a look at where it's trading right now, it's down slightly just about $93 a barrel. so below that $100 mark. brent crude, though, just above that mark, $102.83 right now and down slightly today. gold up more than 7% from last week. now in its best two-day winning streak since january of last year. but based on what we've seen over the last two weeks, it's not hard to have the best two-day streak. analysts are saying perhaps that long time is coming and wrapping up. we are wrapping up a busy week
inarnings central. among the companies set to report results this morning, chevron and dr hort on, certainly going to be an interesting week there. tie conresults just crossing the wire. we're seeing earnings beating the street. ex items 3 cents above estimates. revenue slightly above consensus. that's sort of the story we're seeing from all of these industrial companies this quarter. you're seeing etfs beat, revenues similarly beating across the board for a lot of these companies. tyco, a major industrial security company. >> to account for whatever spin-off that was. >> adp. >> yeah. >> adp, which is -- >> they need to redo the chart. >> adp has been a blockbuster stock. you have adt in your house? >> i have adt. >> but not in your portfolio. >> no, not in my portfolio. but you saw the chart. it looks like something happened and they fled to readjust. >> so october last year is when that spin-off was finally affected.
adt and tyco seeing some up side because of this recovery in the housing market. a lot of people building houses and they need security for those houses. >> you know what? you're really smart. what would you do to go back and find the history of tyco? do you know all the things that went on at that place? >> the only dennis -- >> yeah, all that stuff. >> yeah, yeah, of course. >> you weren't going through it at the time. >> do you have a high pitched voice or a low pitched voice? >> was he a good dancer or a bad dancer? >> do you know the answer? >> oh, yeah. where was that, sardinia? he spent a lot of -- millions of dollars on his life party and his wife -- the minute he went to jail, his wife visited him once. >> to tell him see you later, honey. >> to tell him you're in jail, i'm out of here. >> and do you remember the cake? >> people werepeeing vodka.
but he has a really bad overbite. he's the worst dancer. but no, i was just wondering. >> that entire empire, what he did was build that up. >> it was a huge roll-up. and we had him on as a guy -- >> the next jack welsh on the cover of barons. >> and now they're basically disassembling that entire company piece by piece. >> greene who did a -- >> i don't remember his voice at all. >> no. you're focused on the voice thing. it was very high pitched. >> unpredictable toiling for that old video right now. >> you're right. >> it was a woman. we'll leave it at that. do you remember that cake? >> you're leaving a lot to the imagination with that. >> i'm trying to think about what you're saying and i'm also trying not to -- >> they had an icarus record. how stupid can you be to have an icarus record at your party?
unbelievable. >> and you remember the umbrella stand and there was -- and a shower curtain. >> were through, joe? >> i was there as it was happening, yes. >> you know bertha coombs's brother -- >> was they? is he single? is he in jail? not that there's anything wrong with that. >> well, we talked about earnings earlier. we've heard from honda this morning overseas. japanese automaker posting a 6.6% year on increase quarterly net profit. honda, of course, has been helped by the yen's rapid depreciation. strong sales of the accord and crv models in the united states. it's interesting to see how a lot of these companies operating across asia are responding to the depreciation in the yen. some say it's a good thing, some say it's a bad thing, but either way, they have to figure out how to posture. >> i think they'll love it. >> i took it all the way back
for no reason. you know, for a company that has worked years and years to get out from under that. >> just goes to show how quickly you can tarnish a reputation. >> all right. now, they want me to read this. you're an up and comer, a go-gutter. i don't know why i can't sit here today and i'll do a few interviews or something. but can't i sort of be the emeritus anchor today and you guys do the heavy lifting? >> are you wearing your sweatpants? what's going on here? you just want to hang back, delegate -- >> why do you need to do this if you're here and both of you guys are ready to go and, you know, the prompter -- >> yeah. do you want me to do this or do you -- let me ask -- >> i feel like i'm looking a gift horse in the mouth. >> i just have to please. all right. there are a few other stocks to watch today after the bell. starbucks reported that earnings were in line with expectations and then the company raised its full year profit forecast was
schultz on yelled arguing with the did you thinkin dounkin' do? >> at the same time? >> they're trying to do a wapner thing, a -- an icon. they were hoping, you know, that nigel travis would say to howard schultz -- >> you're a cry baby in the schoolyard? >> yeah, exactly, you're full of coffee beans and nigel in his british accent would say your baristas are rude. >> i don't blame them for at least trying to make that happen. that would have been great. i would have watched. >> i don't know whether it did. it may have. second quarter revenue, though, at starbucks did fall a little short and as a result, even though the outlook was boosted, the shares fell in after hours trading. the stock, though, had gained about 3% in the last five days. fueled by expectations of a strong performance of the company. which you've got to hand it to howard schultz, it came back
when it was i think almost single digits. do you remember that? and then it's all the way back up. and the shares are up 12% this year. and amazon, we talked to mark mahaney in a little while. amazon fell, beat the street, revenue slowed and fell a bit shy of estimates. margins were higher on lower shipping expenses and the expansion of more profitable businesses. what was interesting is i think that the revenue gain and the expense gain were about the same percent. and do you know what they spent on expenses in the quarter? huge. >> so crazy. >> 13 or 15 -- >> the number shot up dramatically. >> i was going to ask. you guys are mahaney. huge employee gains, new jobs. does it match the number of people that have lost their jobs in conventional retail? they're disrupters. are we net positive or -- i bet you we were net negative. >> was this seasonal?
>> there's so much hiring that happened in the fourth quarter. >> but overall. >> and the first quarter to deal with returns and -- >> but i think he has a larger point of view. >> more or less than the people that they've -- >> they let go. >> in retail. they're just left. i bet you amazon is able to do it with fewer employees and dshg. >> if you're an economist who likes productivity gains, who would want to be fewer people replacing those people. right? >> i think he's a genius. he's off after jobs. i don't know who else i would pick. >> are you worried ever about the fact that those margins never seem to get better at amazon? >> no. >> no? >> they can do overnight now. they have 89 distribution centers and they can do overnight. there's one going to be near -- everyone. there's one going to be near everyone. wa do you expect? can you even imagine trying to build a company that does this? that you buy something online and -- >> i get it. more revenue and want actual real improvement to the bottom line. >> you have to build the
infrastructure. >> i think the fact that it rose slightly is a good sign, especially while expenses rose. i think that a lot of companies who saw their margins go up, they say they did that by cutting costs in a big way. so the in fact they were able to increase their expense -- >> they keep building up that whole -- do you know about this, joe? they just have these huge server farms and you can rent space on a server farm for your cows and chickens from amazon. >> okay. that's good. >> all the way up. >> it's now $274 and they were saying the same stuff at $30. i don't know. something happening. something is going well that the people then predict. we're going to talk to mark mahaney about amazon and i want you to ask him about that, whether the margins ever get better. the stock hasn't needed that.
>> i'm well aware of that, yeah. >> baidu shares falling after hours. this is fun. if you looked up, kayla, on baidu? because it will come up and it will be all chinese. >> yeah. >> it's in tiananmen's square and -- nothing happened there. tiananmen what? >> only good things. >> yeah, only good things. the company's earnings and revenues largest search engine says it's going to increase market expenditures to counter the comp tigsz the move may further flow its profit growth. we were supposed to be done with that story at 6:04 and it's 6:14. our producers thought they were going to get a break today from the b.s. >> and now i'm never going to be invited back. reporting sixth straight rt
yeaher of profits, samsung launches the galaxy s4 in the united states tomorrow. new tech gadgets. we should all be excited, right? >> no. this directly plays into the loss of dominance that we're seeing at the opening in apple. there are people that say samsung is just going to take the mantle. samsung, android, google and that it's -- you know, when it was 600 billion, we should have known, it's not worth 600 billion. is it worth 308 billion? >> the critics will say that when it reached 600 billion, that was the legacy of steve jobs and tim cook was not a decisive enough leader, didn't have the foresight that jobs did and now we've seen two steps forward, one step back on the product line. >> and who loves this stock hadn't acted on their love for the stock at 750? >> right. i mean, to get any more gains at that point is pretty -- >> for so many years, that was one of the points i made with the kids yesterday that we had on. there were 15 of them and i
said, how many of you guys have heard of apple or apple stock? and all 15. we should have known that. it's the one company but they knew that the stock had done well, most of them. apple stock. >> did you ask them about samsung? >> i don't think they knee know samsung. >> they know what's familiar. they say the white ear buds, they have imagine that apple is doing well. >> parker hannafin. >> rr donnelley. >> limitless paper. >> they didn't know. in other flus, yahoo!'s chairman is resigning effective immediately. fred amarosa will remain on the company's board until the annual meeting in june. he'll be replaced by chairman maynard webb. >> days of our lives? >> yeah. >> i believe it's still on. maybe i'm wrong.
>> it came back in web form only, right? i think it's a new launch. >> you guys, i actually blocked that part of my life out of my memory. >> i think it's great. i think it's cool. >> the interesting thing about the amaroso stepping down is there's a lot of speculation about how he got along with marissa mayer, what his thoughts were on the turn around, he was appointed by the former chairman. people just thought he was running the company into the ground. so it's clear that if those were his allegiances, that it was just a matter of time before he would eventually step down, but probably start with a clean slate here. >> wow. cnbc, definitely still on. maybe it's webb. >> it was on cnbc. >> there was a very well known -- that now has gone from tv to the web only. >> okay. >> for the next generation of soap operas. >> the hourglass. >> it was assumed that people only watched two out of five episodes every week. that's why the plot was so
expendable, like somebody could jump out of a building for three days. >> there was this industry that sprang up, like magazines, oprah digest and t-shirts. >> unlike your spanish ones. i don't know why i'm pointing at you. >> spanish ones end. >> gets pregnant, has the illegitimate child, does something and by the end it all happens. >> and the story line is always the same. somebody starts out very poor and end up very wealthy, usually through marriage. >> it is sort of like the episode of "24." you're like, how did all of this happen in this time period? >> i never did really watch that. mac, do you to -- now mac was involved. >> attention, travelers, the senate has passed legislation to end air traffic controller furloughs blamed for significant delays this week. many in the senate had left for the weekend. a house vote is expected as early as today.
i think the best way to get action at this point in time is to have something in place that consumers get up in arms about. that is what happened with in this week. people got to angry about it that they said, okay, okay, we're not going to do this. it seems like if no one had been talking about this, it probably would have gone off without a hitch. the senate doesn't do many things unanimously these days. they know they want to break up the banks and they're not happy with these furloughs. >> well, the faa is part of the department of transportation. the department of transportation on any given day, they waste so much. they spent so much money. we're talking about millions and millions that they could have -- from all these things that -- i mean, you could find like the stuff that you can't believe we've been spending money on. you could find ten instances of, what, they're doing that? and they weren't going to -- michelle, you know they wanted this to hurt. they wanted people to -- >> and to what degree do you think the air traffic controllers union was complicit
in making it even worse in terms of a slowdown to make it -- >> right. and we had gary kelly on yesterday. >> and so punish, by the way, private industry, business, etcetera, the most likely users on the shuttle. did you watch where it was said the airline industry pays so much tax, then they took a bite and gary kelly was on brian williams last night. >> i saw him. >> you did? >> yeah. >> this was only supposed to affect 10% of the air traffic controllers. in and of itself doesn't sound like average, but when you think about average delays, over an hour in addition to the furloughs. >> average, yeah. >> the one thing you have to understand about airport funding, which is so frustrating, is that we pay huge fees every time we fly, right? and you would think that an airport like jfk, which handles so much traffic would get a proportional amount of the money to keep it up to date. doesn't happen. instead, it all goes to congress
and it all gets divided politically rather than on a real needs basis. that's why you have these horrendous delays on a good day. >> we are not going to end this show today at 9:00. we're going to take an extra hour just to do all the things that -- we're late. so we're just going to -- "squawk on the street" one guys don't need to show up. >> you made ross wait 20 minutes? >> ross has been pacing back .forth. we'll finally give him a turn. ross westgate standing by in london. ross, good morning. >> i'm enjoying the whole new dynamic this morning. joe, are you comfortable? are you feeling comfortable, joe? >> the minage, the wild threesome we have going here? you're too gentlemanly in english to say that, aren't you? >> i was just inferring it. >> yeah, i know you were. where is kelly? this austerity has just got her down. she can't believe that the
keynesians aren't in charge. where is she? is she in spainurve the 28% unemployment personally or -- >> no, no, i think she's -- i think she's trying to do her bit to off set austerity on her lunchtime. >> is she shopping? >> she might be. i couldn't possibly comment. >> look at that. look at that. >> yeah. it's not as bad as it looks. we are weighted to the downside, it looks dramatic, but it's not that bad. about 8 to 2 outpacers versus decliners. we've been up in the last five days in the ftse euro 300 and in that time, we've been up around 4%. today, down 0.5% for the ftse is 00. the cac 4 is off 1%. xetra dax off 0.5%. the ftse mib is down 0.75%. yields lower again, in fact, the six-month money is the lowest we've seen for italian funding since we created the euro. there we go, short-term funding
chugging along. today is the dow is up a little bit and the s&p is weak. making headlines, it's official japan is approving the resumption of 787 dreamliner operations. japanese airlines will be allowed to resume flying the dreamliners once they complete installation of the battery fixes. no word on when the flights will actually resume. shares of boeing have done really well this year and, you know, bought on the weakness caused by the -- >> wow, you made a ton of money. >> you made a lot of money the. >> stocks getting a boost yesterday from a batch of better-than-expected earnings and the upbeat data in the jobs space. collin moore joins us on the set, columbia management. overseas, roughly $450 billion acroa kracross 50 four and five-star rated loans. welcome. >> good morning. >> so are you decisive?
what do you see from here? >> we initially had some top end of our range around the 1595 level at the start. it's always hard to predict the exact number, but that was the upper end of the range. i still tend to think that people are too complacent and more recently, if you look look at how the tips markets and commodities have been may having, they're beginning to show more signs of things being weaker. equities, as joe mentioned, the s&p keeps powering through. >> alternatings reports have coming out. they might also seem to confirm some of that. revenue, they'd to squeeze it to make revenue, they've been light on revenue, even if they've been hitting on the bottom line. >> that's my concern. when you look at revenue being the struggle and earnings coming through, how long can you keep squeezing that lemon? there's cost cuts, things you can do, but ultimately, you still need the revenue growth to come through and on a global basis, you're out, the european data, how week that is. japan, the deflationary number this morning.
where are you going to get that continual revenue growth from the equity markets don't seem to be too worried about that. >> so is that where you are? the market moves higher and keeps moving higher despite your worries. sometimes the market is telling you something. >> yes. we could easily be wrong. certainly wouldn't be the first time in my career. >> but your target was 1595. when? at the beginning of the year? >> yes. >> so you hit 1593 pb that should have been a good thing for you. >> it was my thing. >> why would an extra eight months time make it more -- why would that validate the 1595? >> it doesn't in our asset allocation discussions. >> you thought that would be the high end of the range. >> that would be the high end of the range. eventually, you begin to trim on equity and you've effectively already hit it. it's already between 1508 and -- >> 1593, that was the closing high at one point so that was right on your number. >> right. >> so do you see it at the end
of the year? >> i don't see much reason to move off that target. i think we're going to struggle a little bit in the second quarter. gdp is coming out in a couple of hours. i don't think the real issue is q1 gdp. it will be q2. we were talking about the sequest sequester, what would be the impact of that. >> if you're preparing for that in the equity markets, taking a look at the fund flows out last night, this past seven days, the first week in eight, they're actually met outflows from the equity market, about 7.3 billion and net sdwrout flows from equity etf. do you feel like investors are start to go pullback from equities and reallocate into fixed income as innan as that might sound right now? >> i think, kelly, it's really interesting. we've all had the debate about how interesting certainly treasuries are at their current yields. but, yeah, i think there's more caution coming in. is he saved some of our investment grade bond portfolio at the beginning of the year and
add to equities. but there is a real debate. >> and go into what? >> it's more the alternative of something that is beginning to -- perhaps the 5% or 6% alternative space is where you want to go. >> the final turn. >> it's necessary on correlated, but how do you find that and is we're raet creating it through different derivative structures. you can do it, but it's very hard to push the returns up without taking a lot of leverage, more than, say, 4% or 5%. and i've heard joe's point, is it close to that sort of market top and that's about what's left on equities at most, why not try and do that in a less volatile way. >> and it's hard to pick. i don't know whether you'll be right about that or not. and i think about the fed and how we don't know what's -- valuations are -- we're in almost a new paradigm because we've never been in a situation where the fed has been like this. >> that's right. historically, we're at a low pe. i don't know how you measure it historically. because there is no period like
this that i can think of in the distribution of pe that we've looked at, it's sort of like a curve. at this end, it's where you have lower growth expectations and the risk of deflation tends to keep pes lower. and you can't compare it, really, to too much in history -- >> but that would offset the lack of alternatives. you would think at zero everywhere else that you could get a 20 times earnings in the stock market, wouldn't you? >> i don't believe that is correct. that's too simplistic. people say that. it's more about what are the forward expectations and low growth and fed policy, joe, is telling you that you have -- >> deflation. >> and the thing is, do you think the retail investor participated more in those rallies and that's potentially what drove up the valuation? >> they tend to come in late. and then maybe not even in yet and -- >> and that would be a good sign for you, right? if there's more revenue? >> but if you're concerned about how much money those people are
making, if they're trying to fund the pension plan or their health care, you actually want them to deliver. many of them coming in to add momentum, the market is actually troubling. >> thanks, collin. it's good to have you on. coming up, what do george soros and jcpenney have in common? we'll tell you next. >> did he buy clothes from there? >> potentially. also, why shares of amazon are lower this morning. "squawk box" will be right back. we're all
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welcome back to "squawk box." george soros has disclosed a 7.9% stake in jcpenney. the news giving a boost to shares in after hours trading. ta gain of nearly 6%, you can see. >> i don't -- >> he probably says jacques penny. >> what do they have in common? >> stock. >> that's not having something in common with a company. >> okay. all right. >> they're both old? i don't know. >> there you go. >> that is something. >> i'm sure he would love to hear that. >> he's still asleep right now. but you look at jcpenney, he has a passive stake. he's not going to try to push any specific piece. but if you look at 3.5%, 3.3 billion dollar market cap stock, people say the real estate alone is 3.5 billion is a value play. maybe he's on to something.
>> if ron johnson won't wear the clothes from jcpenney -- >> i didn't know that. >> ron johnson, rumor has it won't wear the clothes from jcpenney. he would keep a closet in his office and change into it before a big company meeting. >> so you would thipg think that george soros is not looking at the strategy been he's looking at some inherent value, right? >> right. >> amazon under pressure this morning. the company's shares are falling. mark ma haney covers the company for rbc markets. it's down. is this a time if you like it to get in, mark? or was there something troubling in the report? >> this is what i call a push quarter. the over/under here was whether they would hit 30% unit growth and they hit 30% unit growth.
we would be buyers on that kind of weakness. back up the truck price and probably more for us, maybe 230, 240. >> don't you prefer to jump besos at this point? if he were to do something and i were a shareholder, which i'm not, but if i were, i would say, you know, jeff, do what you need to do. in terms of building expansion, centers, who at this point would second-guess jeff beso? >> let's see, there's a good number of people like maybe john donoho at ebay. maybe the people at google are going to try to take a swipe at this same-day delivery business that he's building out. he's built something with over 200 million active customers. he's doing large unit growth. still 30% unit growth is relatively unusual to find. we think there's a chance for that to reaccelerate as we go through the back half of the year. that's what it's going the take for the investments to go higher. >> mark, i have a question about their retail strategy.
last year, jeff beso telegraphed this idea that potentially amazon would move into brick and mortar retail. we haven't seen that yet. do you think they'll backtrack on that strategy? if i think they'll extremely unlikely. covered amazon for 15 years. they've been very clear about their strategy from the beginning. they think that they have an economic advantage precisely because they're not paying top dollar for retail locations. so i'd be shocked if they changed that. maybe they don't have a demo store if they have enough twices, if they come out with an amazon set phone. a demo store where they share some of their devices. but i think they have no interest in developing a broad retail device. >> how do you think about it? is it a gadgetmaker? is it a retailer? is it netflix? a warehouse company for cloud computing? wa is it? well, it's at least five different elements.
it's retail business. it's a marketplace business, alla ebay. it's a devices business as you pointed out successfully with e ereaders. and it's a content subscription business potentially taking on netflix. >> how do you value it? >> discounted cash flow. and we've looked at it on price to sales, price to free cash flow. wa you do know about this company is it has unusually sustainable top line revenue growth and it has an unusual conversion of earnings in the free cash flow because they have this negative working capital cycle. so you have to look at it on cash flow. >> all right. mark mahaney, thank you. do you watch "squawk box"? i mean, do you get up early to watch it? >> i do. and i dvr it, too, for a rainey day. >> have you seen the jeff beso -- watch this. a baby seal walks into a club.
>> how about this? one of the kids yesterday, they didn't get it out. if i had asked, do any of you have any jokes, one was ready to tell a joke. will you be my foil? >> sure. >> let's say apple introduces a weighted drink. how would you spell the icup? >> icup. . >> would that not have been a great -- >> that was a joke? >> that's a demo right there. >> that is a good joke. >> he was going so to ask he me how do you spell icup? and i was going to say, i-c-u-p. >> that's the modern version of is your refrigerator running. >> it turns out -- yeah, exactly. >> it's great to have him on demand whenever you need it. >> would you not be happy? he's young. i think he's probably like my age or younger and it's worth like $10 billion or something.
welcome back. making headlines, microsoft coming out on top in the first of two patent trials versus google's motorola mobile unit. microsoft owned only a fraction of the royalties that motor oil la claimed -- >> patent. >> does that hurt? >> it does. and sitting next to you even it's worse. manhattan. i don't know. i don't pronounce my ts. i overenunciated it because i was sitting with you.
>> i don't want you to hurt yourself. >> all right. console. we're going to slip in a commercial break. joe hits the link toes talk green on and off the course. >> no makeup on. ide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business.
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legendary course desire and redesigner. and guest hosts to talk about golf, about investing at the same time. it was windy. and you will see my combover goes up. >> does it show the real color underneath. >> very funny. people still write in about take the rug off. >> this will be proof finally. >> in a bad way it will be proof. >> you have seen donald trump up close, right? >> they're yelling at me. anyway, we will get insight on risk and reward from reece and howard ward of camco investors. >> as the preimminent designer and redesigner of golf course, each hole that you do, you think about each hole in terms of risk
and we ward. >> and a challenge. >> so you want to make a hole i guess compared to the stock market there's a way to get a risk free return of half a percent or 50 percent or 100%. you want to make it so a golfer has to choose risk and reward. >> that's correct. >> you have been on a lot of different times. i would imagine in terms of playing out here, you're low risk, very conservative, don't necessarily bite off more than you can chew and limit the amount you can lose if you're wrong. >> i don't think that's a fair characteration. golfing is like investing. and you learn from experience. being out here but real life experiences in investing.
>> the real difficulty of the seventh whole is the contours of the green. it is is beneficial to hit it a long way. it's a hard shot. >> i think that most individual investors in particular strive for the higher percentage shot, the the more consistent shot. she's are hazards. the same is true in investing. there are some signals you can look to to avoid hazards. they can be as simple as heavy insider seller. i would look for companies with any sort of controversy surrounding accounting. when there's a lot of turnover
in the executive suites. companies that have consistently missed their earnings guidance. or overpromised and underdelivered. if they have a history of doing that, what makes you think that is going to change. >> it is so great about the game of golf. the wind changes every day, it's a different hole. >> you need to look at the study history, learn from history. but things change. >> you can manage all 18 holes despite how you did last hole. >> out here if you hit a bad shot, you can do pretty well. but it can ruin the next 12 holes. and the same thing happens if you get burned. >> it's just very hard. part of this plays to your emotions. one of the things i think you have to do as investors and
golfer as well is try to divorce your emotions. you have to keep your head down, keep your eye on the ball. you have to do homework. don't pay attention to the crowd. the crowd is usually wrong. >> there we go. >> so you saw don peoples there too. we'll talk to him later. >> i thought your hair looked great, by the way. >> it did. but we only had one shot that followed the ball to the green. is there a reason for that? >> if you take a swing and hold really high and hold it it looks like a great shot. >> we wanted the investing advice more than the shots. >> which you got. and the other greenhouse too. he threw his club up into a tree. >> well, i'll look forward to that. vestors.g up, two well-known
i'm michelle caruso qaa pwraeur cabrera. >> better than getting called josh lipton. >> i said her last name. >> kayla. she'll be the first financial person. actually maria has already done that. and we will to that with you. >> she's not named kayla. >> maria is more common than kayla. we can definitely do it. work with me. >> here are your morning headlines. 90 minutes away from the first assessment of first quarter economic growth. gdp showing an annual growth rate of 3.2%. amazon.com reported 18 cents per share, 10 cents above estimates. this quarter sales forecast is
largely shy of consensus. rising concerns about international sales. a return to the air for boeing 787 jet. it approves the new battery system. >> today's guest hosts are m&a power players. $1.5 trillion we were wondering why we thought a young happening actor. it's zac efron. >> we had you confused. >> they booked you on purpose, right? they did. all right. >> and you said i'll go by zac. >> co-founder of synergy partners.
great to see both of you. ralph, evercore only second to raymond james ahead of all the major banks. what do you attribute it to? just good management? >> no. >> been doing well. >> we have been doing well. it's a function, not that the m&a markets are so robust. it's a market share story. we're taking market share from the larger firm. all the independent firms are. centerview and evercore are benefiting. >> centerview is doing great too. but you don't have roger with all the connections. >> i would say fortunately we have the benefit of coming on every three or four months.
we don't have to come on every day and come up with a new story. the fourth quarter was a strong quarter driven primarily, we believe, by end of year selling, driven by tax changes. but we have been going $500 billion to $600 billion a quarter. and that's just fine. it's not great, but it's not lousy. >> is it a new normal, do you think? is that pretty standard level? >> i think we're in a very gentle trend upward. if you look historically at 30 plus years of m&a, it is a cyclical. it is gradual because of the same overhang. >> would you agree -- go ahead. >> it's been like this five years. you have had $2.5 trillion global market at the top, down
from 4.3,.4 at the peak. m and a is a lagging indicator. you'll first have to get robust growth. >> and that would explain why we have heard now for years so much cash on the balance sheet. if you do a deal right now it's yesterday in ways that we haven't seen in decades past. that big bang doesn't happen. >> for the first time in my career, capital allocation. getting very well rewarded for raising dividends. when are we seeing in any sector the top yield in stocks. >> that's good. >> companies used to say, okay, i need growth, so i'm going to go buy something. i'm not going to sit and wait for it to happen. a lot of people said with debt so cheap right now you would expect company to be using debt
to buy other companies. they're all refinancing over and over and over again. they're basically sitting on more cash. and building up even more cash. >> one of the great fool's gold in finance is to look at an acquisition financed only with cash or debt. when interest rates are 1% 2,%, 3%. literally the greatest company in the world could buy dairy queen and have a transaction if they're financing it with debt. >> buffett? >> no. he has insurance liabilities that he's financing his acquisitions with. he doesn't use debt consequentially as a lot of firms do. certainly when we advise our clients we ask them to look a lot kropbd just taking cash and giving up a.0001 return.
>> you guys are here to talk m&a. we were going to try to decide where the stock market is valued. because it's lagging, can we glean any important information from the m and a world to tell us where we were in the cycle. or you don't know until know. >> you talk to a ceo, senior management and ask them about the economy. 2.5% economy is not the economy where a ceo says i want to take on more risk, rather than to say my goal is to mitigate risk and figure out how to -- >> it was a bad financial break. i have no misconceptions about that. but i remember back in the '70s
i was -- late '70s i was more hopeless about the country really. people that are young forget how bad things are in terms of oil prices, 20% interest rates. we came back so much quicker. i know this was a different type. >> nobody i talked to who is running any kind of company is running anything optimistic about where we are as a company. >> you're saying because there was so much leverage it took 10 years that's why it explains five years into recovery we still have a participation rate falling. we're having trouble getting out of our way at 1% gdp growth. it doesn't snap back like it does from a different type of recession? >> well, first of all, consumer is 70% of the economy. and consumer at the height of the financial crisis had 140% debt to their personal income.
historical average is in the high 90s. the consumer has been taking some portion of their income that historically they had been spending and paying down that -- >> where are we now? >> right at 105%. so we're back almost to normal. the one thing we don't know is markets and people tend toover shoot. some of us are parents of depression children. they were very reluctant to take on debt. and we may have created a generation of people -- >> an article in "usa today" today about mill lessenals avoiding risks. so many have student loans but they're racking up debt in many years. they want it to a checking
account or savings account. they don't want any interest bearing security. they want it where they can see it and they don't want it anywhere else. do you think that is a trend that's going to stay? that's a different generation. >> it is. they're just beginning to learn to save. and i do believe we are starting to enter a period where investors understand they have to go out. equities are if you're investing 30, 40 years, there's no where else to be particularly in a fixed environment. the central banking authorities from a market point of view are certainly strongly encouraging people to go out the risk curve. >> when you talk to your
clients, how long do you tell them you're expecting the trajectory of the recovery to last? >> first of all, most clients have their own perspective. that's not how they will make the decision. everybody will be consistent to say over a three to five-year period growth will be modestly better each year. that said, they are using that anyway. does this make sense strategically. can i help shareholders for the long term? it's also important to recognize at least in the u.s., corporates are actually very busy with m and a. you look at the down turn. there's no cross border. everybody is very concerned about europe still. private equity is very hard to
put together something above a certain level. >> we're going to touch on all those issues coming up a little bit later. you are here the next couple hours. >> so you don't know selena gomez? >> if you get her on the show, let me know. >> he'll come back for that. >> can you believe he's willing to ditch me? >> they're scrambling to change the entire content of the show. air traffic control furloughs. we'll have two airline pros to talk about this ongoing battle. check out the futures. the dow is raising a little bit slightly. i would open about six points to the up side. "squawk box" will be right back. [ male announcer ] you are a business pro.
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checking futures right now. we have been around the flat line. up seven points or so. down on the s&p. vf corp. makes things like northface, timberland. 24 cents above. >> impact of the sequester cuts on the faa create aid travel crunch at the airports. joe leonard is former ceo of airtran and air canada.
trish gilbert. trish, let me start with you. we'll finally get a deal in congress to put an end to this. what's your assessment of what's going on here? >> well we're very hopeful. standing up as leaders and getting this measure passed. we hope today early this morning sometime mid morning the house of representatives will do the same thing. they are anxious to get back to full complement of air traffic controllers. >> what do you say to people who are skeptical to say this is a workforce that's highly unionized and made things worse on purpose? any truth to the discussion? >> that's absolutely incorrect. these men and women are very proud of the profession and they come to work every day from the day they were hired until the day they retire. to purposely do anything like
that would be unconscionable. >> do you think they have done anything purposely in order to make this be very dramatic and extremely inconvenient? >> we're just looking for the solution. and the leadership we saw in the house of representatives today to get the men and back back to work to get planes at capacity again. we are not happy with delays. if we could control weather we would completely wipe it out. you have your mike working. how are you? >> good morning. >> how much political motivation do you see? >> well, i don't know. there's just some odd things. when asked to reduce your budget 5.5% and the furlough 7% of the air traffic controllers, it just doesn't add up. so i don't know what the answer is. but in most businesses and the
government, whether federal, state, or local, when you are in an emergency, 5% reduction is not all that much. you have to suck it up and get it done. in this case that wasn't the case. >> what do you say to individuals who say, wait a minute, why are people who fly special when making cuts to head start, when making cuts to other areas, the government that helped the needy. why should there be a special appropriation for this? >> well, because the economy depends so air travel. and i think the aviation area, the airlines are taking a disproportionate hit in that the cuts are primarily in air traffic controllers. faa has 47,000 employees, 15,000 of which are air traffic controllers. and that seems to be where the brunt of the reductions are coming. the current program calls for
about 7% of air traffic controllers to be furloughed when the budget cuts are 5% to 5.5%. >> why couldn't the airlines respond by doing what they always do, which is pad the time that's outlined on your ticket. couldn't you increase the time? why is that not an option? >> it's always an option but a very expensive option. you know, the -- these delays, the air traffic control delays have gone up 300% according to a couple of airlines i have talked to recently over what is normal. and so there's clearly a disconnect between what's going on and what should be going on. >> doesn't this highlight a much
longer term program which is the way congressional indicates funning to airports, lack of upgrades, et cetera? we have delays now. but we have delays all the time for no good reason. it starts to wane slightly at laguardia. and everything slows down dramatically. jfk is frequently a stkafter and so is newark. i refer to those because those are the ones i use. i was going to ask trish that. >> thank you. it's a very busy and complex season. and the faa -- >> and it's out of date, lack of upgrades, and the next gen they were going to allocate to the congress never seems to do it. >> modernizing and redesigning. we have been working with the
faa to make that happen. unfortunately, once the cuts were put into place, a lot of activity has either completely halted or simmer mode as controllers went back to the operation to make sure we could keep as much capacity in the system as possible. it's unfortunate that that long-term goal took a hit for the short-term prices. >> would it help if we did privatization and take a model as we have done in different parts of the world? >> no, i don't think so. between the faa and the airlines and the airports, there's great cooperation today. and i think that if you look at the stats the airline performance imp dramatically the last few years in think about the capacity that you could have had if things were running better. it could be much greater. >> capacity could be better.
with the cooperation of the airports and the faa and the airlines, the performance has gotten a good bit better than in the past. it's the safest system in the world. there's nothing that comes close to comparing to the safety of their current airline system in the united states of america. >> gentleman, lady, thanks so much for joining us. >> thank you. >> thank you. coming up, some stars -- >> good job. nice work. nice work. >> are you going to weigh in. >> yeah. right on. kayla? waiting for us. >> it's all yours. all yours. >> some stars will have to wait for round 2. do you want to -- you want to be hand in hand with the government as you run your organization? i mean, give me a break. you should get -- that's exactly what i'm bringing it up. some stars will have to wait for round 2 of the nfl draft. analysis on first round picks and talk about the business of
the draft. i'm really excite build this. plus, our what's working now series takes us to latin america. where where you should be expanding your portfolio with fresh investing ideas. "squawk box" will be right back. , but at xerox we've embraced a new role. working behind the scenes to provide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore? with xerox, you're ready for real business.
welcome back to "squawk box". 7:25 on a friday morning. google officer larry page met south korea's president this morning. the president has been pitching her, "creative economy initiative," which calls for creating new markets and jobs by developing technologies. they had lunch with top executives from samsung. they produce the android operating system -- >> korea has the greatest penetration of broadband in the world. >> it's not surprising. >> north korea -- >> they don't have electricity. >> or food. when we come back, much more from wall street. evercore's ralph. people know him as ralph.
and centerview's efron. we're pulling zac efron stuff for you. >> is that what this music is? >> we are going to have a few. it brings you stocks with a latin twist. names big in latin america. there's only one person that's going to give it the pronunciation they deserve, to my right, and help you make money. we'll be right back. oh, boy. [ groans ] ♪ ♪ [ engine revs ] ♪
welcome back to "squawk box". $6.5 approximately, up 42 percent from a year earlier for samsung. some analysts expected sales to slow as consumers waited for the new phone. and at&t wireless today will let customers control home security cameras from their tablets. it starts today and expands to 50 markets by the end of the year. and teamsters covering
250,000 workers. the union says it's the largest collective bargaining agreement in north america. it is set to expire july 31st. >> i'm trying to talk. so a annoying. latin america is the focus of our what's working segment today. and prospects there remain quite positive. joining us is manager for the latin america equities at blackrock. i'm going to let you know up front that michelle will listen to your pronunciations on all of these things. and only in the nicest way will she correct you. number one, it makes sense to me they are actually growing down there, aren't they? there must be opportunities where it's not just an alternative to zero percent return. down there things are percolating, right? >> absolutely. we are seeing mexico in the
pact. everybody talked about brazil being the leader. but mexico has been the one that surprised the most. we have a new president pushing forward a press aggressive reform agenda. that's been the preferred market. we believe brazil is coming to the point where people will start to focus on it again. we have moved to brazil overweight and under weight in mexico. >> really? >> michelle's heart is all a flutter when you mentioned his name. he is handsome. very handsome. >> so is william, though, in your own way. what would i buy-in mexico? >> under weight mexico. because it's already moved. >> yeah. mexico is trading 18 times. they are good stocks to buy
there. we believe the brazilian economy is starting to show signs of recovery. first quarter earnings have been disappointing. some of the stocks this week reported better numbers. so we believe that if you can buy the banks, you can buy-in brazil. >> let me ask you this, bill. >> will. >> the knock on brazil has been -- they can't grow more than 2%, 3% because of the compute rate, you can't add another train. the load. it is not going to get any better any time soon. they think the best has happened for brazil. >> look, i spent two weeks last week. i talked to some government
officials. it is improving. there are a lot of grid locks in infrastructure. but i think when you look at brazil, it is a domestic growth economy. what you need is the domestic economy moving. people got excited in the last decade. those folks are still there. they're consuming. 25 million people will join the middle class before the olympics hit in 2016. yeah, you have some issues. they are work to go improve the logistics, infrastructure. when you look at the portfolio, we're investing more. >> what's the number one pick in latin america if somebody wanted to allocate? >> the banks of brazil. >> will, good to see you this morning. >> are you ending this? this is my interview. >> oh, sorry. >> i'm looking at the so i can buy both of those banks?
itub and -- >> itau, just like it's spelled. >> and what about -- will, one more thing. how about peru? anything in peru? >> peru is our favorite economy among the smaller ones. but there aren't that many stocks that trade more than a million a day. >> those are white knucklers, right? because you can get in but sometimes you can't go out. >> if you go down in slower gap stocks, it's tough to go up. >> will, what's your background? how come you're so fluent? give us something. >> born and raised in saw paulo,
brazil. >> so you speak portugese. >> portugese and spanish. >> great to have you on the show. we appreciate it. >> since i'm the football expert, i will tease to your nfl draft. >> did you see what happened yesterday? >> i didn't watch it. >> no guys that do fancy -- just all guys that stand there. >> we will have it coming up after the brief. overall number one pick in the draft. some surprises, tradups and shockers as we get ready for round 2. brian will get us up to speed in a couple minutes. futures up slightly since we came on air. if the market were to open right now, the dow up 15 points, nasdaq up by just about seven points. actually they have come back down. "squawk box" will be right back. [ penélope ] i found the best cafe in the world.
i wish we would stop checking them. up eight points on the dow. two points on the s&p. d.r. horton reporting 32 cents a share for the second quarter. revenue exceeded consensus. orders up 34%. backlogs higher by 54%. >> and back to ralph, president and ceo of evercore. and zac efron, partner and co-founder of centerview partners. >> and actor. >> i believe you were in high school musical? >> three of them. >> he was the tree. >> you've darkened your hair since then. >> we got it. we ordered that. >> we're god you didn't wear that shirt today. we have seen lackluster volumes.
net income falling 40%. and a big part of their business is on advisory revenues and advisory fees. and completing a lot of deals. their stock is getting hit right now. do you think that's a sign of further weakness or specific? >> i think also the problem of many of these public firms, it's lumpy by nature. if you don't look at it over a 12-month basis you don't get a good sense of what's going on. knowing where sit in active conversation i'm surprised it would be anything but square. i think the tone is better today than it was most of the first quarter. first quarter dominated by a few
large situations. being involved with heinz, for example. that doesn't khroez until second quarter. how did they feel about the close of the business. >> sit problematic to be a public company when net income is so lumpy. evercore is public, so you have seen this firsthand. look at a trailing 12-month number. oftentimes investors don't give you credit for that. >> investors, we have spent a lot of time with analysts and investors, educating them and looking at the trailing 12-month trend. we always talk about the quarter. i haven't looked at the numbers. and i would be interested in knowing what the top line was as well because they have
restructuring charges as well. but there are two things that are definitely going on today in the m&a world. number one, the independent firms, centerview, evercore, greenhills are, as a unit taking share from the large firms. and i would also say, and the numbers support this, in the public ever, evercore is disproportionately taking shares. >> why do you think that's happening? >> if you want to really answer the -- what drives revenues in our business is having an increasing number of the people on wall street, ceos, boards, of companies want to talk to or want to have in the room advising them when they're doing
something. >> that's got to be discriminating because most want a balance sheet, don't they? >> it's a bifurcated world. >> every firm, big or small, has a limited number of really good bankers. fortune 500 ceo looking for the big balance sheet will still go to his favored two or three bankers at any of these firms. >> throw a few coins your way. >> just generally they have a choice of somebody they want to be working with. still very much a personal business, whether jpmorgan, centerview, evercore. >> what's driving the growth of both of our businesses, if there was a secret list on wall street of who are those people -- >> there is one of those. i know there is. >> there are more in 2013 than 2012. more in 2012 than 2011.
more in 2014 and 2015. >> you can pay them better. >> there's a push and a pull to it. people are not as thrilled with the model there. they want to spend 100% of their time advising clients and not pedaling the broader array of -- >> you know, obviously you can also say we don't have that perceived conflict of interest. we're not trying to do your ipo. >> i think that's actually it. i think you win business because you do a good job. whether you're a small firm or day firm, that's what it comes down to. they are all fine. but when it's all said and done, the board, senior management is simply saying does this group, this individual seem like someone i can trust to give me the right advice for the longer term.
someone i can trust for their judgment. and i think the people in the industry are generally being trained differently today than when ralph and i started. >> let's say they break up. what does the competition landscape look like for centerview, evercore. if all of a sudden there are a ton of investment banks. >> i think if they break up, the investment banks and the commercial banks you will wind up with firms that are still balance sheet oriented investment banking firms. you'll have what morgan stanley used to be. but they will still have, you know, big fixed income businesses, big equity businesses. and both of our firms have a business model where the only
thing you compete on is the basis of your ideas, intellectual capital, relationships. and the only form of competition is advisory fees. it is so small they will never separate it away. >> all the things just said makes me not want to invest in one like yours. they are mercenaries and go from firm to firm to firm and you can't depend on revenue, right? >> disagree. if you can't figure out how to make your colleagues happy with when they're not getting paid. you want to create a true partnership. you're training from the most junior levels. kids out of college, men and women out of business school. to advise a company you have to understand the full sweep of what they're doing. you have to be comfortable operating with them 80% of the
time. so when it comes up you can provide the best advice. if you like that kind of mind-set you ought to like these kind of firms. if it becomes a star system, we haven't created the right kind of culture. >> you pay people fairly and you have a great culture. it's a partnership culture. >> any of your employees think they get paid fairly? anybody whack out and say i got exactly what i deserved. >> there is something that would deter centerview from going public? i imagine there are a lot of reasons. >> we like being private. that would be the least of them. >> i love when a democrat uses
transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready feal business.
we can't say because roger will get mad. look, we're both country music fans. i love roger. day one of the nfl draft in the books. derrick fisher being picked number one overall. that was no surprise. but the dolphins, we had steve on yesterday. i asked whether he would do something like this. he made a move early for a human highlight reel. brian schactman joined us. just corn fed beef, man, right? >> listen, i got stats for you. they're incredible. first of all, who knows eric fisher. imagine when this guy got recruited. alabama didn't want him.
michigan didn't want him. he's a top pick in the draft. unbelievable. how about this, joe, first seven picks all linemen. the average weight of those seven picks, 284 pounds. the lack of star power was interesting. when you think about this the first quarterback was picked number 16. that's as low aspening ton -- there was not a single running back picked in the entire first round. when you think about the draft here it's incredible to think it went that high. they have to protect the quarterback. the bengals have a great pick with tyler iford from notre dame. >> you know roger, right? have you been around goodell. >> yes. >> that guy walking out looked normal. goodell is 6'2", 6'3". at least 220.
and he looked like tattoo. >> roger is not a small guy. 6'6", 306 pounds. >> that guy, eric fisher. >> yeah. >> 6'6", 306. the second guy was the same size. maybe a half inch shorter. they got a guy from north carolina, 6'2", 311. >> i'm shocked anyone from north carolina. >> two guys in the first round. a couple things i want to touch on. manti take dough did not get picked. >> imaginary draft. >> good one, joe. he was supposed to be a top five pick. we're talking $20 million distance. maybe $15 million distance. he is almost unendorsable too.
that whole episode, couple month stretch cost him millions of dollars. hopefully somebody will pick him and we'll go from there. >> that is good. >> yeah, he's good. >> what could we do, brian? we couldn't even be the punter, could we? the skinny guy with the big shoulder pads. we couldn't even do that. >> there's a chance you could get lit up. >> can you imagine us trying to get through one of those guys. or if they were trying to get through us. >> i don't know. because you have had access to this stuff. if you see the speed. >> speed and size some it's frightening. >> day two preview, two and a half tons of linemen. >> beef. >> what are they serving as far as food here? >> these guys eat everything in
sight. they didn't eat pasta 20 years after they stopped playing. the top rated quarterback was supposed to be geno smith. this happens every year. the guy sat in the greenroom the entire night. and this guy, by the way, declined interviews afterwards. he said i'm not sticking around for day two. people think that more negatively reflects on him, that he is not taking it well. that is excruciating to watch a guy through that when he is expected to go in the first round and nobody touches him. >> quarterbacks had a tough night. look at the last few years, that's why. >> in some ways having these big beefy guys and no names made some drama. i will say -- a guy from central michigan, i wonder what his story is. it's such not a premier for
football. >> you know what's weird. i don't know whether it's content or what. suddenly we're following everything that's going on. great season last year. i watched the masters. i think it's going to be like that with the baseball season too. it's getting -- even hockey. anyway, thanks. >> i even paid attention to the nba. and i never pay attention. i lo final four. >> okay. >> even that is interesting. content is king. live content. coming up, first read could be a market move this morning. we're going to have the number. plus, rundown of earnings this morning. a disrun tore looking for ways you try pay things. "squawk" is coming back.
even the madoff fund. how secure are your online payments in we'll ask the co-founder of stripe how he plans to revolutionize the way buy online. the third hour of "squawk box" right now. welcome back to squawks box. i'm joe kernen along with michelle caruso-cabrera and kayla. she has three names. two per person. >> average. >> our guest host ross schlosstein, ceo of evercore partners and blair efron. first, kayla has your morning
headlines. either change it or i'm not going to have you back on. >>. >> it's the double s. >> starting with sch. >> you know, i didn't name either of my children ralph. >> they're both girls. >> you are looking at the boeing 787. japan approved a return to the air for the 787. it approves the new battery system. the senate passed legislation to end air traffic controller furloughs. the approval came late last night without dissent. many senators already left for the weekend. a house vote as early as today. legislation would give authority to transfer up to $253 million and some accounts into other programs. amazon.com reporting 18 cents
per share, way above estimates, though revenues were slightly short. let's get a check on the markets right now. we were up. slightly off highs. if the markets opened right now s&p would be down 3 points. as for europe, still seeing some right across the board. ftse down 35. cac in france is down a point. >> in less than half an hour, u.s. economic growth on the first quarter. economists looking for growth of 3.2% after a lackluster fourth quarter. joining is managing director, chief u.s. economist at barcl s barclays. dean, good to have you here. so fourth quarter was measly,
painful. 0.4%. this first quarter supposed to be 3.2%. which more accurately reflects it. >> i think one needs to average the two together. 1.7% growth. we think growth is going to be about 2%. despite today's better number we don't think people should get too excited that this is the year it breaks out. >> what explains the dramatic swing from first quarter to this quarter? inventory growth in q4. they had to rebuild some inventories. that's what a lot of this strength is about. >> just reading, you said this will be the best we see. and you said because aus stator starts to take control.
are you saying we're in a period in the united states known as austerity. >> even in europe we talk about it as if they have cut something. all they have done is raised taxes. people don't think of that here. we think of it as a sequester. you're talking about tax increases, payroll as well as people like ralph. >> that is a major factor. there has been some delay of the effect on consumer spending. >> less money in the private sector or less money being spent by the public sector. >> they're both happening. both are contributing to the fiscal draft. >> if we at 2.3% of what we cut, how do we ever address our
long-term issues where we have to cut so much more. how will our economy take it? it doesn't have to be fixed this year but at some point we will have to. >> we're so soft and cushy and we don't like any pain of any kind anymore. >> nobody likes tax increases or spending cuts. that's the bottom line. >> if we had 3.5% growth we couldn't have either. a combination of tax increases and spending cuts will lead to slow growth. >> i think those are the two major that are slow in growth. there are things to spur growth going ahead. but those generally are not happening right now. >> do you think 14 will be better?
>> somehow better. >> do you worry about obama care? >> certainly there is some evidence that firms are perhaps hiring less or keeping people in order to comply. >> i think if you look at the evidence the last year. once again, you have to be very careful in any of these things to judge. certainly gdp by a quarter and even in health care but a friend or two, per capita health care is slowing down. >> because of the recession. >> well, it's because of the recession and just a general, you know, greater car. transfer of some of the expenditures to individuals. >> that's not the spirit of the question. the spirit of the question is when you have higher costs, when it costs more to hire an employee, when the cost goes up,
what happens? people buy less of it, despite. >> michelle, premiums are actually down. 30% lower than the year before. >> but premiums are up. >> to actually get a slowdown, positive, what you're saying is because we're in a slower recovery generally. >> you didn't answer my question. does it cost more to hire an employee because of health care reform? if you run a retail business. if you run mcdonald's. does it cost more? >> i think that is dispositive fact in terms of going higher. >> you don't think it hurts? >> i don't. >> even zandi knitted it. he might get a job finally. he's going to get the -- he was
japan first. >> yeah. >> in 2050 japan will have 75% of the population that it has today. one of the things we know is we know exactly how many 38-year-olds there will be in 2050 in japan. europe has had tricky population also. the thing that has separated the united states in growth in population, which ultimately is the -- one of which not the most important determiner of gdp is population growth. that has been driven by immigration. that is the one thing that separates us from the vast majority of europe and definitely from japan. >> what you haven't said out loud and what makes it unpopular is when you have more immigration you have lower wages, right? you can hire more people. more restaurants can hope. et cetera, et cetera. right? a lot of people don't want to say that out loud but that's the
bottom line. >> i think the evidence is mixed on that. it's not obvious that most u.s. workers have lower wages as a result of immigration. >> i'm not saying it shouldn't happen -- >> for some that occurs. but in general is the economy grows faster. there's more income created. that creates more jobs. >> without housing bubble and internet bubble, what is the unemployment rate that we can sustain in the united states. >> we think that 7% is sustainable unemployment rate. >> that's europe. that's so depressing. we had 16 years of bush and clinton at 5%. i don't want it. 5.3. we had 16 years. >> i think the problem is, as you mentioned, those were. >> matt: midst of asset bubbles. and that was a big part of how we got the unemployment rate down that low. i think the better way to do that is through education and
training rather than through u.s. bubbles. >> and we need the participation rate to come back too. >> it is not going to come back is? >> demo? >> because of demographics. >> a lot of people on disability and unemployment. the biggest force is the baby boomers. >> randy rooney. mike wallace. take your pick. barbara walters. they said she is retiring at 84. she said right to cbs -- abc, i mean. abc leaked that. and she made them pay. i love that. >> you have to give me an interview because i'm retiring. she uses that line. all right. blair, thanks for joining us. blair efron. dean and ralph will stick around for the gdp data. >> as you have been discussing all morning, we are counting
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he was just transported from the hospital to that facility where he will now be imprisoned. of course he was read his miranda rights earlier this week. the interrogation will continue. the. >> our next guest has mastered the art of making money from bankruptcies with one of the best track records in the hedge fund industry. up 21% annualized over the past 11 years. ceo and cio of the 3.2 distressed hedge fund solace. every year. 21%? >> on average. >> that money doubles in three years. i did that fast. >> absolutely. >> you're impressed for a tv guy? >> i am impressed. i hate to be like a grave dancer, but you like when things
are bankrupt i gather. >> we provide liquidity to investors that need to sell. hopefully when companies come out they are in better shape, better balance sheets. >> business is not as good as a few years ago. >> no, that's correct. we have more liquidations. a lot of the financial bankruptcies from 2008 have given hedge fund industry a tremendous amount of assets to invest in. lehman brothers, madoff. >> that's a really nice way to put it. the average holding, because i know a lot of bankruptcies take forever to work out. lehman on six years. mf global two years. how long do you wait in an investment before you say enough is enough. >> there's two strategies. if you want to get involved early on and restructure the company, that's one way to play it. another way to play it is more in a liquidation strategy like lehman brothers or mf global when you wait until you know about the process.
then you play for cash. >> do you think the safer way is to do it while the cap is still in bankruptcy and wait for the whole process to end. tribune company just exited bankruptcy. a lot of investors are running into debt and expect it will get broken up. is that something post bankruptcy you would invest in. >> we like to be on the steering committee to be involved with the reorganization process. and you do that when a company comes out of bankruptcy is an on going entity. you wait until closer to the end and just get the cash like mf global customer claim. >> only corporate? no sovereign ever. >> just corporate. >> do you play in europe? >> we would. the process is different. >> it's harder when the entire continent is bankrupt.
isn't it hard tore buy when they are bankrupt. >> our preference is not to get involved in the process there because it's not as kaoer as it is here in the u.s. i would prefer to play that, buying it, getting out. making money butaiting until the very end. >> because maybe they never flourish again. >> there's a lot of government involvement obviously. >> and you don't like that? >> it's hard to play a that. you expect the government and the european country to bail a company out. if that's your investment thesis. >> i guess it could go wrong. in cypress they did not. >> beyond government involvement, what other metrics do you look for? >> we buy at a discount.
you want to look at it versus the peers in the industry. we want to buy at an appropriate discount. >> what's appropriate in that case? >> mgm trades 8.5 times multiple tax flow. >> how did you play hostess? >> pure liquidation. >> chapter 11 restructure to chapter 11 liquidation. we bought as much as we could knowing what the value -- >> the brand. >> the ceo was on "squawk box". they announced the sale of the twinkie packet of brands. >> right. >> and mentioned they will probably get a billion dollars in proceeds from the sales. they have about a billion dollars in creditors.
creditors could be made whole. >> close. >> even though everyone lost their job. >> we bought it substantial discount. >> like what? >> 30s, 40s, 50s. now we're into the fourth line of the structure. 100 cents on everything. >> do you have to think more about what might happen in terms of the laws that you think are laws that might not really be laws? >> lots of things happened in 2008. we had to rethink. short sale rules changing. lots of government. >> usually senior creditors would normally do better. >> that's correct. and i think there was more there
of -- >> you're worried about that too, ralph? >> yes. >> oh, come on. >> moral hazard is a real issue. absolutely. >> government persuasion, chrysler what really pushed it, senior creditors agreed to the transaction after significant arm twisting from washington. >> after they got an offer they couldn't refuse. >> they couldn't sit down. >> that's right. >> thank you. interesting topic. >> do you like twinkies? >> i do actually, yes. >> bloomberg would be sitting there doctor good forget it. no, no, no. >> nothing better than a box of twinkies and 64 ounce soda. >> when i see him i'm going to light up a cigarette and open vodka. >> his carbon footprint is the
size of a city. >> g 550 subway. >> thank you, chris. it was great. >> if yu a gambler and the nfl draft isn't your cup of tee, you have something else to bet on. the government's first bid in the first quarter. expecting growth of 3.2%. still ahead, how secure are your online payments in we'll is ask co-founder of stripe. his company wants to revolutionize the way you buy things online. where there is an espresso to match my every mood. ♪ where just one touch creates the perfect coffee. where every cappuccino and latte is made at home. and where i can have exactly what i desire. ♪ nespresso. what else?
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you know that song. british book maker taking bets on a comeback by the band abba. it opens in may. speculation that a reunion tour could be part of the grand opening. patty power is offering 14-1 odds that they will perform together in 2013. coming up, just minutes away from the first read on gdp in the first quarter. see if the number comes in as strong as economists expect. as we head to break, another look at u.s. equity futures hovering around the flat line. still in the red this morning. dow opens nine points to the down side. s&p 500 down greater than one point.
box". less than a minute away. the first read for the first quarter. this is going to be interesting. fourth quarter was so bizarre. remember it was negative for a while. what a shocker that was. nothing that couldn't be made up. rick santelli standing by. chief economist at barclays. >> all right. survey says, no 3%. up 2.5. many were hoping we want a strong economy. there's a lot of factors. up 2.5 consumption. this is a good bit of news. we thought that the consumption would be one of the big contributors, and it was. up 3.2. that is double or close to double. the the price index as expected up 1.2.
a little less than we were expecting. it was also up 1.2. we could summarize pretty quickly. everybody was looking for a strong number because of the mean reversion aspects of very little defense spending at the end of last year. things like pulling those dividends forward to avoid faxes. and that issue probably helped the fuel consumption we're seeing. do whatever you want to do. this is still not a bad number. the real issue on 2.5. interest rates making new lows for the week on 10-year. should we settle at 1.67.
>> i wonder if it gets revised up or down. and chief commitment at barclays. 2.5. 2.9. that's 1.45. this is as good as it gets? >> 2.5 is the strongest. >> we were at three. a little bit below consensus. what i would highlight as well, consumption, even though it was strong we think is not going to last. retail sales will show slower growth in the second quarter. heating expenses were quite a large contributor in q1. that's not sustainable either. we went from unusually warm into a normal quarter in q1. heating expenses surged. that's not going to continue. >> what happened to big inventory buildup.
they hadn't built inventory in the fourth quarter. fiscal cliff and blah, blah, blah. so we didn't see that happen in this quarter. isn't that problematic? >> i think production numbers did improve in q1. that happened in the reports. we did see that pickup in production. that again is a temporary force. >> nice to have the fed isn't it, rick? that's what i can come up with. thank god. they're always there. which can maybe -- maybe we'll get a rally out of the stock market by the end of the session. >> a great article on cnbc.com.
it is a great place to see. they talked about how the underground economy may be fueling stronger personal consumption. that made sense. we all look around. we truly look at employment on employment. it has been a question mark. i don't mind bartering except the one aspect that the taxes are going under the table as well. just things to think about. we were not going to scene. we just look at the gdp, aren't we going to see another swoon? >> we will see another slowing, we believe. three in a row. three years of swooning in a row. we always seem to get traction and it's never there. >> the difference perhaps is there isn't a panic about europe, at least now, we saw over the past few years.
but in terms of the gdp slowdown, we think it is coming through. >> is it positive because of the fed? >> i think we have an economic policy that is leaning too heavily on monetary policy and is not probably getting the right shape of fiscal policy. we need much bigger deficit reduction. believe it or not we all agree on that. but we probably need that to be much more heavily oriented in entitles and back end loaded. and what we're seeing right now is effectively the fiscal head winds of the payroll tax increase, the year end tax increase. bush tax cuts for the sequester, whatever your view is is going to be a head wind for growth.
>> i wish we hadn't done is the stupid payroll. we never knew -- until we didn't have it we didn't know we were going to get hit coming back in. >> that's right. >> i wonder if it was a positive. >> well, i think you have to look at the policy in terms of what was appropriate at that time. the economy was a lot more at risk then. the good news, there are more self sustaining private sector forces today. housing will be a support for the economy for the next two or three years. energy as well. >> you don't have anybody talking let's do t.a.r.p. again. >> they thought they could get away with it you would see
t.a.r.p., 2, 3, 4. without a doubt. >> he's right. >> i think actually even the people who want to spend more in discretionary spending want to spend it on things that would be considered investment. infrastructure, r&d. >> i love when the government invests on my behalf. >> if all the bridges were brand-new and much nice, that doesn't build commerce. i don't know. it's not digging a hole and filling it back up. >> it was business investment spending. they are not in the mood to spend and hire at this point.
>> and it's open argument why it's not. >> if you are expecting 1.5 to 2% growth. >> it's dean's facility. >> do you think we'll see any nuggets that could spruce us to the upside. q4 is looking better than we thought. could we see any positive surprises? >> i have learned not to guess revisions heated of time. we think as the sequester hits, one thing i point to, wealthy effects are going to help the consumer. mainly from the stock market but the housing market. they will boost consumer spending later in the year. >> there may be another way to get up 2% growth rate. the next time we get our second quarter first look, so in a
couple of weeks, they will have rejig erred how they calculated gdp. they will go to 1930s and change methodology that. will be one way to get gdp up. one of my favorite exists said they may make it disappear. >> rick, i'll see you this weekend i understand. >> of course. i'll be there. i'll be there. >> are you kidding me, rick? >> are we going to the msnbc party? >> of course. >> we are? >> absolutely. absolutely. >> joe and i will be in the corner. >> we'll be in the nose bleeds. in the nose bleed seats.
all right. we are going to go. we are going to go as we are. not in disguise. all right. >> no. you had a disguise. >> we have to stay together then. i don't want to get beat up. special thanks to dean mackey. appreciate it for sitting with us this morning. chevron reporting first quarter results. posting earnings of $3.18 a share. 10 cents ahead of the estimates. key development projects remain on track. coming up, our disruptor series. an entrepreneur who wants to revolutionize online payments. hello!
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is and how it works. >> sure. it's good to be here. stripe is building payments for the web. before stripe the way you do this is using the legacy banking infrastructure. it was slow. it was complex. it was expensive. it had this very chilling effect on e-commerce. with stripe, we're building out the product in a different way. it does all the heavy lifting in the background and just gives a product they want to use. >> how does a company qualify to be able to use stripe? what is some of the background check? >> we have worked hard on making it easy to use stripe. one of the powerful things about the internet is that it enables anyone anywhere to trade with anyone else. >> pay pal obviously is an infrastructure built on the web, now offered on mobile. square lets you accept credit cards anywhere. tell me about how stripe is
different from some of the longer standing companies that are already out there. >> so versus pay pal, we're building out stripe in a very different way. with stripe we give the merchant complete control over the when a customer is paying, they do so entirely on the website or within the the mobile app. and we think that's very powerful for merchants having the control over the user experience, to own that relationship with the customer. >> it is. but when you defer all the control over to the merchant, obviously there are going to be concerns about cybersecurity. what are you referring to be able to lack down the infrastructure. >> stripe itself, the the industry standard. one of the core things we do is
store payment information for merchants. >> do you find there's a lot of competition in the market that you operate in? >> this market is interesting because it is still very rapidly growing. if you look at the device penetration stats we are seeing year over year growth. there are one billion smartphones now. >> but you could argue too -- i'm looking at the bank earnings from last quarter, 30% mobile usage from the banks. eventually that market is going to be saturated. and i imagine a lot of customers you're getting are simply transferring some of their wealth via that system. they have adopted the smartphone. once that entire base moves online or on mobile, do you feel like you have enough of a customer base to go on? >> i think the predominant trend that's still most interesting is that the market as a whole is growing.
people are getting to value from the internet. yes, there is competition but it's still a rapidly growing market. what we're focused on with stripe is making it easy for any business to start trading online and start accepting payments from customers. >> when you're fund-raising, john, what seniority of questions do you get from investors? i imagine you're in that process and meeting with them all the time. >> your age. >> sequoia, general catalyst and peter teal and elan musk. and i think for them their main focus that this market is still rapidly growing. and commerce online is still a huge space with a lot of opportunity. >> elan wouldn't be afraid of a young kid because he was a young kid too. >> do you know how to write code?
>> my background is in software engineering. before stripe i was working on a previous online business the the hardest thing was charging users money. we viscerally felt this pain before. >> it's amazing. you guys are different. earlier in the show the size of all the letters on my thing here were too small. i had to call someone out here to come and change something so the letters went back to where i could read them. is that kind of similar to writing code? it was under file. >> changes the font size. >> that's what i had to do. could you do that? we're different. it's amazing to me. >> i bet you don't know who tattoo is a either? >> john, don't answer that question. you don't have to answer that question. >> they're so amazing, kayla.
>> they are amazing. >> i want to know how old is he? >> he's 22. i'm sure you saw this in the news. 17-year-old build this new summary app that sold for $30 million. do you see you're doing something like that? is that where you think stripe is headed? >> we're focused on large commerce market. to the earlier point the powerful thing about the web today is that you have people all over the world of different backgrounds. i myself, my background is in software engineering. people all over the world in different backgrounds increasingly linked and it allows for the fast speed of iteration. it allows them to start building something. previously there were many more barriers in place. it's not just me or young people or programmers generally. there is this increasing trend towards people being able to
build things and trade with other people that wasn't there before thanks to the internet. >> parker dropped out of m.i.t.? >> john, thank you so much for being with us. you're a good sport. >> great to be here. >> different nowadays. amazing.p. i was never that smart. ever. i'm still not. anyway, we'll check in with he'e from harvard. >> he did live in a car for a while. carl quintanilla is on wall street. where in the world is carl quintanilla? we thought of this. no one has ever done this before. nia, i'm mike. what do you drive? i have a ford explorer, i love my car. and you're treating it well? yes i am. there are a lot of places you could take your explorer for service, why do you bring it back to the ford dealership? they specifically work on fords. it seems to me like the best care. and it's equal or less money, so it's a value for me. get a free brake inspection and brake pads installed for just 49.95 after rebates when you
>> welcome back to "squawk box." jim cramer is joining us from the new york stock exchange. cue -- it tells me where you are, carl, which is not -- i'm not going to read that. we're supposed to do some -- basically, you got in tight with one of my favorite companies and you still get the great interviews. that's where you are, right? >> it's been a nice, long relationship with mcdonald's, joe. we can actually say, though, that we for romeoville, illinois, suburban chicago.
this is their innovation center. baefshgly an incubator. they can create any mcdonald's around the world in any fashion, they can create new ones, test new designs and run them at different rates and it's the first time that live cameras have been in here and it's a perfect day to talk to ceo don thompson especially coming off of gdp. >> are you going to make a big mac, carl? >> have i had the big mac? >> no. are you going to make one? >> oh, big macs? we're going to make everything, are you kidding me? you've never had a chance to order before because this is where all of that stuff -- it's one thing to design it. it's another thing to replicate it in 34,000 restaurants and this is where all of that happens. so yeah, we'll be cooking today. >> that's a plum assignment. mcdonald's is politically incorrect which makes me love it. i want to go three times a day because of bloomberg. i want it eat it in front of him with a lot of salt. >> and they also had the
transfats out and they took it out of the fries and somehow they did it. nobody else can do it, right? >> cramer and i talk about this all of the time. it's an engineering company, almost more than it is a food company. no wonder yet ceo is an electrical engineer. it's an amazing story. >> great pedigree of leaders and we all remember back when we could have bought it for -- cramer, remember we could have bought it for $11 a share when they had the ceos that died suddenly. it was 11 bucks. >> a lot of people felt they couldn't grow the company and the stores got dirty and they recognized that and they cleaned the stores up. >> and they weren't active enough in china. oh, yum's eating their lunch in china which is actually yum that the point. >> eating their lunch in china at kfc. >> but i cannot -- i don't feel bad at all.
an american icon and i don't care that, you know, that they -- there's a city that won't allow you to serve toys with your happy meals because your kid likes to go to mcdonald's. that's the opposite of the world and i won't mention the city. >> san francisco? >> yeah. that place. >> carl, i'm envious. >> okay, joe. >> say hi to mr. thompson and we'll see you. i outed you on living in a car again, jim, but we already talked about that. >> we'll see you soon, too. >> coming up, our guest host has been ceo ralph schlossstein and we'll give him the last word when "squawk box" returns. [ penélope ] i found the best cafe in the world.
we have a few seconds left with our good friend ralph scosstein. he choked up when he said america's best days are still ahead. 7% unemployment is the best we can do. 2% growth is the best we can do? have we passed the point of no return on things like this? >> no, i think that i agree with the president -- former president, and first of all,
he's a stunningly wonderful man and someone who should be admired by everyone across the political spectrum, but, look, we have still the greatest system, the greatest capital markets in the -- >> do we ratchet down our expectationses? >> no. in the immediate term we'll do better than other places, but we're eating through the overhang of a dead binge, a ten-year debt binge and it will take us some time. >> thank you. come on again and bring some of your friends. make sure you join us on monday. "squawk on the street" is next. ♪ ♪ ♪ good morning and welcome to "squawk on the street." i'm david faber with jim cramer at the new york stock exchange. carl quintanilla is in the chicago suburbs getting ready